An escalating war over taxes

Gov. Brown saw it coming a year ago. The loser, he said, 'will be the people of California.'

From Sacramento — One year ago, Gov. Jerry Brown prophesied a cataclysmic "war of all against all" in California if tax negotiations broke down with Republican legislators. They did. And now we seem to be headed into the cataclysm.

But neither the Democratic governor nor practically anyone else foresaw the war being launched from the left by forces that normally would line up with him as allies — by so-called progressives and fellow crusaders for education.

In an interview last March, Brown predicted the consequences of Republicans not providing the necessary two-thirds legislative majority to place his then-tax proposal on the June ballot.

Ultimately, he told me, "there'll be an unleashing of left and right forces. Everyone will come out fighting. California will become a battleground."

And the former Jesuit seminarian added, briefly speaking Latin: "It'll be like bellum omnium contra omnes. A war of all against all. The loser will be the people of California."

The left forces are in the fiercest fight right now, battling each other. But the right also is arming. One warring faction is the governor, whose proposed sales-and-income tax initiative is backed by a growing coalition of labor, local government and — at least tacitly — business.

It's up against the California Federation of Teachers, the smaller of the two major teacher unions, which wants to sock only millionaires, and hard. The larger union, the California Teachers Assn., is backing Brown's proposal.

The third warrior is wealthy civil rights attorney Molly Munger, daughter of Berkshire Hathaway Vice Chairman Charles Munger. She proposes raising income taxes on all but the poorest and is being cheered on by the PTA.

Most politicos had expected the CFT and Munger, by now, to have deferred to Brown — "the adult in the room," as he's characterized by David Kieffer, head of the Service Employees International Union in California. Kieffer has joined the chorus of those urging the teachers union and Munger to abandon their initiative efforts.

But neither shows any sign of obliging.

"It's not going to happen," CFT President Joshua Pechthalt insisted at a news conference last week.

The union already has spent about $1 million collecting signatures to qualify its "millionaires' tax" for the November ballot, he later told me. "And we're ready to plunk down another couple of million."

"Talking to some of these people," Brown complained last week to the Sacramento Bee editorial board, "I don't find an appetite for inquiry."

It's not like he hasn't tried, Brown continued. "I went to the CFT man's house, spent two hours there. Helped his daughter with her homework."

But Pechthalt asserted that the governor isn't offering to compromise. "It's a political miscalculation on his part, frankly."

"It's getting dangerous," says state Senate leader Darrell Steinberg (D-Sacramento). "Unless there's a pretty quick game change, I can see all three things ending up on the ballot."

That's a probable triple loser, in the view of most political operatives who aren't in the CFT or Munger camps.

"If you ask people to decide among three proposals, many will say, 'I'm confused. I'm just going to vote no on all of them,' " says consultant Rick Claussen, probably California's most successful initiative strategist. He's not involved in this war.

"And each of the three is going to have to campaign against the other two. You can't just say 'Mine's best.' You have to say, 'Mine's great and the other two are terrible. And here's why.' "

Mark Baldassare, pollster and president of the Public Policy Institute of California, says even if a measure sits all alone on the ballot, voters can be dissuaded by opposition arguments that there's some phantom "better idea out there."

"People say they like initiatives," the pollster continues, "but they're very cautious about voting 'yes' — and even more so in the case of taxes."

In a poll published last week, Baldassare found likely voters supporting Brown's proposal by a bare majority, 52%. Opposed were 40%.

And the opposition campaign hasn't even started, Baldassare notes.

In a recent Field Poll, the "millionaires' tax" was supported by 63%, Brown's by 58% and Munger's by 45%.

The first 10 words of the official summary of Munger's measure are enough to turn off many voters. It reads: "Increases personal income tax rates for annual earnings over $7,316."

It would raise the most of any of the three proposals, $10 billion, funneling it primarily into schools.

Brown's proposal would raise $5 billion to $7 billion, basically for schools and local public safety. It would increase the sales tax by a half-cent and hike the income tax for couples making more than $500,000.

The teachers union measure would raise upward of $6 billion, mostly for schools, by dramatically boosting income tax rates — by three to five points — on earnings exceeding $1 million.

The CFT is playing to the crowd, the angry voters fed up with the widening gap between haves and have-nots.

But it's bad policy. California's government already relies too heavily on the wealthy, resulting in a volatile tax system that overreacts to economic booms and busts.

"It would amount to a 40% tax increase on people who currently pay 40% of the income tax," says Allan Zaremberg, president of the California Chamber of Commerce.

The chamber decided Friday to oppose both the CFT and Munger measures. It took no position on Brown's. The California Business Roundtable took the same action Thursday. Expect both to ultimately support the governor.